Along with Commercial general liability, errors and Omissions, Statutory worker’s compensation and Cyber liability insurance, Automobile Liability insurance is very often required when working with US companies. How to meet this requirement for a company registered in Asia?
What is automobile liability insurance?
Automotive liability insurance is a type of insurance coverage that provides financial protection for the policyholder in the event they are found legally responsible for causing injury or property damage while operating a vehicle. This type of insurance is typically required by law in many places to ensure that individuals have a means to compensate others for the harm they may cause in a car accident.
There are two main components to automotive liability insurance:
- Bodily Injury Liability (BI): This coverage helps pay for the medical expenses, rehabilitation, and sometimes even lost wages of other people involved in an accident for which the insured is at fault. It also covers legal defense fees if the policyholder is sued.
- Property Damage Liability (PD): This coverage helps pay for damage to someone else’s property, such as their vehicle, buildings, or other structures, in an accident where the insured is at fault.
It’s important to note that automotive liability insurance does not cover the policyholder’s own injuries or vehicle damage. For that kind of protection, individuals typically need additional coverage, such as collision coverage or comprehensive coverage.
Why will all USA contracts require automotive liability insurance?
In the United States, the requirement for automotive liability insurance is often mandated by state laws. Each state has its own set of regulations governing the minimum insurance coverage that drivers must carry. The primary reason for these requirements is to ensure financial responsibility on the part of drivers in case they are involved in an accident.
Here are some key reasons why automotive liability insurance is mandatory in the USA:
- Financial Protection for Others: Liability insurance ensures that if a driver is at fault in an accident, there is a source of funds to compensate the other party for medical expenses, property damage, and other losses. Without insurance, individuals might struggle to cover these costs, leading to financial hardships for the victims.
- Legal Requirements: Most states have laws that mandate drivers to carry a minimum amount of liability insurance coverage. These laws are in place to promote public safety and to ensure that individuals take financial responsibility for the potential harm they may cause while operating a vehicle.
- Reducing Uninsured Motorists: Requiring liability insurance helps reduce the number of uninsured motorists on the road. Uninsured drivers can create significant problems for others in the event of an accident, as there may be no insurance coverage to pay for damages.
- Protecting Lenders and Lessors: If an individual finances or leases a vehicle, the lender or lessor often requires the driver to maintain a certain level of insurance coverage. This protects the financial interests of the entity providing the loan or lease.
- Promoting Responsible Driving: The requirement for liability insurance is also intended to encourage responsible driving behavior. Knowing that they are financially responsible for potential damages may incentivize drivers to take more precautions on the road.
Can I buy Automobile liability insurance in Asia?
You can’t. Automobile liability insurance is typically associated with the legal and regulatory requirements of the country where the vehicle is registered and primarily used. In the case of Singapore, like most contract in Asia, liability insurance is mandatory for all vehicles. However, this insurance is designed to meet local regulations and does not directly fulfil the specific requirements of United States.
There is just no possibility to purchase automobile liability insurance when your company is registered in Asia so you will need to inform your trading partner in USA that you are unable to meet this requirement and they will understand: their contract is designed for US market only!